Industry Insights

Seeking Stability at Audi

Stadler is the latest Volkswagen executive to be arrested as part of German authorities’ investigation into the company’s misdeeds, nearly three years after it admitted using illegal software to cheat U.S. emissions tests. Insider Abraham Schot has been appointed interim CEO of Audi, VW’s most profitable business, effective immediately. He will also serve as Chairman of the Board of Management. VW said Stadler was released from his duties at his own request, and that his suspension is temporary, “until the circumstances that led to his arrest have been clarified.”

Schot is a former President and CEO of Mercedes-Benz Italia, who joined the VW group in 2011. He has headed Marketing and Sales with Volkswagen Commercial Vehicles since 2012, and was appointed Member of the Board of Management for Sales and Marketing in September 2017.

Peter Mosch, Chairman of Audi’s General Works Council and Vice Chairman of the Supervisory Board, said that labour representatives backed the appointment of Schot as interim CEO to ensure the business would not suffer from the leadership crisis, Reuters reports. “For the employees it is now important that the interim CEO returns the company to calmer waters, drives the (diesel) investigation and brings it to a conclusion, but mostly keeps the day-to-day business in view,” Mosch stated.

Stadler attracted negative attention for his handling of the emissions scandal, but with the support of the Piech and Porsche families that control VW, he dodged a management reshuffling announced in August. His arrest could be a game-changer. As the New York Times reports, “Stadler is the highest-ranking Volkswagen executive still in his post to be identified as a suspect in the diesel emissions case,” which is under investigation in the U.S. and Germany. Martin Winterkorn resigned as CEO in 2015.

With Stadler’s arrest, analysts say, questions arise as to whether VW has done enough to reform and whether it will take further action. The company has set aside around $30 billion to cover fines and other expenses related to the emissions scandal, and is investing billions more to develop electric vehicles in hopes of repairing its reputation.

The technique of using software to detect a pollution test and mask pollution levels during them was first developed at Audi. “In designing the defeat device, VW engineers borrowed the original concept of the dual-mode, emissions cycle-beating software from Audi,” VW said in its plea agreement with U.S. authorities in January 2017.